Revision of DBA’s competition
margin model
Changes performed in the
LRAIC models to output the
relevant data for the
competition margin model
Danish Business Authority
Ref: 2014-25-DB-DBA-Margin Squeeze
TERA Consultants
39, rue d’Aboukir
75002 PARIS
Tél. + 33 (0) 1 55 04 87 10
Fax. +33 (0) 1 53 40 85 15
www.teraconsultants.fr
S.A.S. au capital de 200 000 €
RCS Paris B 394 948 731
May 2015
Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Summary
0
1
Introduction........................................................................................................... 3
Changes made in the SQL Access model............................................................. 6
1.1
General approach and changes .................................................................... 6
1.2
Use of the SQL model................................................................................... 8
2
Changes made in the Microsoft Excel Access model ...........................................10
3
Changes made in the Microsoft Excel Core model ..............................................12
3.1
Modelling approach......................................................................................12
3.1.1
Modelled architecture ...........................................................................12
3.1.2
Inputs from the LRAIC model ...............................................................13
3.2
Spreadsheets added ....................................................................................14
3.2.1
Three access scenario inputs ...............................................................14
3.2.2
Competition inputs ...............................................................................15
3.2.3
Competition outputs .............................................................................16
4
Results and analysis ............................................................................................17
4.1
Results for an owned transmission network .................................................17
4.2
Results for a rented transmission network ...................................................18
4.3
Notes ...........................................................................................................19
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
0 Introduction
When analysing the market for respectively wholesale (physical) infrastructure network
access (market 4) and wholesale broadband access (market 5), the Danish Business
Authority (DBA) found that there were a risk of margin squeezes. On this basis, DBA
decided to develop a model (the “competition margin model”) that – for a variety of
scenarios – can calculate profit margins for an alternative operator (a reasonably
efficient operator, REO) on the Danish broadband market.
The results from the model were part of the new analyses of market 4 and 5 in 20112012. Based on these analyses, TDC (Danish incumbent) was imposed an obligation
not to cause margin squeezes (the margin squeeze obligation) for copper based retail
products. The margin squeeze obligation includes single play products (a broadband
connection) and double play products (a broadband connection bundled with VoIP).
In order to be able to supervise the obligation, a margin squeeze tool was developed.
The margin squeeze test focuses on a REO (a reasonably efficient operator), i.e. an
operator that is smaller than TDC but is cost efficient given coverage, subscriber base,
product supply etc.
As a part of the upcoming analyses on market 4 and market 5, DBA intends to carry
out an updated analysis of the REO’s profit margins. Therefore, the competition margin
model needs to be updated in order to reflect current market conditions (competition
with TDC’s CATV platform and with TDC’s FTTH platform, development of bundles
with IPTV services, availability of new wholesale offers provided by TDC such as
VULA, alternative operator network deployments, etc.).
In July, TERA Consultants has sent to DBA a model specification document defining
the REO strategy in terms of network deployment and the REO market share. It has
resulted in the proposal of modelling 3 different competition scenarios which are
summarized in the table below. It has to be noted that they have been renamed
compared to the model specification document to be ordered from the widest coverage
to the smallest coverage:
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Table 1 – Scenarios considered for the competition margin model
A
Coverage
Specific coverage
Broadband
lines
Demand
o/w VoIP
o/w IPTV
Leased lines
B
C
All edge sites
All sites >4000 lines*, no site below 500 lines*
All sites >2000
All sites >3000
No other sites
150 sites <2000 50 sites <3000
15% DSL
15% DSL
10% DSL market
market share
market share
share
20% penetration over broadband
15% penetration over broadband
5% market share
*active lines
Source: Model Specification Document
In this context, the objective of this document is to detail the different modifications
applied to the existing LRAIC models in order to output the relevant data to perform the
competition margin test.
A first modified version of the LRAIC models providing outputs for the competition
model was issued in late 2014 and operators (TDC, Telia and Telenor) have provided
written comments. These comments have been taken into account to deliver a second
modified version of the LRAIC models. This document takes into account these
comments.
The LRAIC models consist of 3 interactive parts as described in the figure below:
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Figure 1 – Structure and interaction of the model
Geomarketing inputs
SQL access
model
Copper and fibre
network inventory
Excel access
model
Copper and fibre
network cost
Excel core and
pricing model
Source: DBA
The required changes apply to the three models. This document details what changes
have to be performed in order to adapt the existing LRAIC models to output relevant
data for the competition margin model.
This document is made of 4 main sections detailing the changes by following the flow
of the calculations and then showing some analysis of the model output:




First the modifications applied to the SQL Access model are detailed; then
The modifications applied to the Microsoft Excel Access LRAIC model are
detailed; then
The modifications applied to the Microsoft Excel Core LRAIC model are
detailed; and finally
Main results are presented.
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
1 Changes made in the SQL Access model
This section first describes the approach taken and the changes applied to the SQL
model, and then describes how to use the model.
1.1 General approach and changes
The SQL part of the LRAIC model uses as the main input the description and list routes
used by TDC’s access network, BTO network and core network. In the present case,
only the core netork needs to be modelled. Neither routes used by access network nor
routes used by BTO are needed.
The core network of the REO has been defined as a subset of the existing TDC’s core
network by selecting manually only the relevant core routes used by the REO.
These subsets are illustrated in the figures below:
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Figure 2 – Passive transmission network
for an operator following the scenario C
1
Figure 3 – Passive transmission network for
an operator following the scenario B
Source: DBA
Source: DBA
Legend: Dark green: Edge sites (POI2
interconnection), Light green: LLU sites
covered (sites above 4,000 active lines)
Legend: Dark green: Edge sites (POI2
interconnection), Light green: LLU sites
above 4,000 active lines, Yellow: sites
between 3,000 and 4,000 lines, Blue:
additional sites
Figure 4 – Passive transmission network for an operator following the scenario A
Source: DBA
Legend: Dark green: Edge sites (POI2 interconnection), Light green: LLU sites above
4,000 active lines, Yellow: sites between 3,000 and 4,000 lines, Orange: sites between
1
Following some comments from TDC following the 1
changed
Ref: 2012-55-DB-DBA-Fixed LRAIC
st
consultation, some core routes have been
7
Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
2,000 and 3,000 lines, Blue: additional sites
The relevant routes for the specific scenarios have been extracted from TDC’s core
routes. This is done by manually selecting the relevant routes that are used to link all
selected COs. Therefore for each scenario a set of ID of routes has been determined.
In order to select the correct input for the SQL modelling, a specific input database has
been created, containing three additional datatables and three additional procedures
(procedures in SQL are equivalent to macros in VBA).
The three datatables are:



CompetitionModel_Scenarios which details the core routes to take into account
(a set of id for each scenario);
Output_Routes_Core_Full which contains all core routes of TDC’s network; and
Output_Routes_Sections_Core_Full which contains the details of each of these
routes.
The three procedures added are Select_Scenario_A, Select_Scenario_B and
Select_Scenario_C.
All standard routes tables has been emptied (neither copper nor BTO network
deployed), and the selection procedures Select_Scenario_X fill the two tables
Output_Routes_Core and Output_Routes_Sections_Core with the correct input for the
chosen scenario.
The only modification to the model database is the parameter “Source_Database”
which is changed to “[Denmark_Input_CopperFTTH_CompetitionModel]” in order to
select the correct input. The execution of the model is performed similar to the LRAIC
copper scenario modelling (however the processing time is reduced to approximately 1
minute).
The ‘Fibres location’ spreadsheet of the Excel model is fed with the SQL part of the
access
model
by
using
the
stored
procedure
[dbo].[Stats_Core_BTO_Fibres_Ends_Per_Co].

For each scenario, a subset of TDC fibre routes has been selected in order to
link all COs considered for the selected scenario. These links start and
terminate at every CO covered by the operator.

The inventory outputted by the procedure is based on the routes used by fibres
links in the selected scenario, on the basis of 24 fibres per route.

The procedure [Stats_Core_BTO_Fibres_Ends_Per_Co] provides an inventory
of all fibres terminating at each CO by summing the number of core-fibres for
which the route starts or ends on the road section of the CO location.
1.2 Use of the SQL model
The SQL model should be launched using the three following statements:
EXECUTE [Denmark_Input_CopperFTTH_CompetitionModel].[dbo].[Select_Scenario_A]
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
EXECUTE [Denmark_Model_V4_CompetitionModel].[dbo].A00_LaunchCopperScenario
EXECUTE
[Denmark_Model_V4_CompetitionModel].[dbo].[Stats_Core_BTO_Fibres_Ends_Per_Co]
The first one will select the right scenario to take into account (few seconds).
The second statement will dimension the network (1 minute), the output should be
copied to the input spreadsheet of the Microsoft Excel access model.
The third statement will output the number of fibres used at each CO in order to
dimension the ODFs. The output should be pasted in the ‘Fibres location’ spreadsheet
of the Microsoft Excel access model.
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
2 Changes made in the Microsoft Excel Access model
The changes made to the Microsoft Excel Access LRAIC model are mainly limited to
the inputs:








The Dashboard defines the competition scenario (to be chosen among A, B or
C);
The Scenario A SQL output data has been pasted in the “ScA_” prefixed
spreadsheets;
The Scenario B SQL output data has been pasted in the “ScB_” prefixed
spreadsheets;
The Scenario C SQL output data has been pasted in the “ScB_” prefixed
spreadsheets;
The Copper input spreadsheet has been modified in order to take the input for
the selected scenario (from one of the three input sets detailed above);
A spreadsheet ‘Fibres location’ has been added to determine the number of
fibre links at each CO for each scenario; and
The proportion of trenches shared has been set to 15% in accordance with the
Model Specification Document.
Few additional analysis spreadsheets not used to compute the output
spreadsheet have been removed in order to make the model lighter and run
faster.
Figure 5 – Parameter added in the Dashboard spreadsheet
Main parameters
Value
Year of calculation
Competition Scenario
Risk premium
WACC used
2013
C
0.0%
5.8%
Competition Scenarios
A
B
C
Source: DBA
The output of the Excel Access LRAIC model (interface spreadsheet) is composed of
several parts, however the only relevant parts are the first one regarding “Civil
engineering without markup for non-network costs”, and the 4th one “Geographic
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
distribution of PON splitters, Core and BTO fibres” which is used to dimension the
ODFs.
Running this model leads to the following results:
Table 2 – Scenarios considered for the competition margin model (annual costs, i.e. after
depreciation are presented)
Scenario
A
B
Number
of
sites (for LLU)
TDC original (for
core only)
C
332
185
103
1183
702,909,432 DKK
540,961,593 DKK
447,297,636 DKK
764,324,625 DKK
4247km
3168km
2580km
5733km
115,375,155 DKK
84,268,861 DKK
68,784,207 DKK
300,265,955 DKK
118,314,705 DKK
87,748,631 DKK
71,692,653 DKK
443,287,426 DKK
4531km
3380km
2753km
14390km
Chambers
22,097,352 DKK
16,354,457 DKK
13,205,948 DKK
32,704, 823 DKK
Joints
22,581,015 DKK
16,703,094 DKK
13,494,728 DKK
80,216,942 DKK
Trenches
Ducts
Cables
Source: Access Excel LRAIC model
It is interesting to note that:



The ratio number km of trenches/number of sites is equal to 5 for TDC, 13 for
scenario A, 17 for scenario B and 25 for scenario C. This is due to the fact that
the extra sites of TDC are smaller and smaller sites but closer and closer from
the already deployed routes;
For trenches, the ratio cost/km if higher for scenario C and lower for TDC. This
is due to the fact that TDC’s network, while being more capillary, is having
much more sharing with the copper access network (i.e. a given core network
trench will host more often copper access network). The ratio is very close for
A, B and C since they do not share any trenches with the copper network;
Other costs vary much more. For example, for cables and joints, this is due to
the fact that TDC has many redundant routes while we assume only one cable
between sites in the REO.
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
3 Changes made in the Microsoft Excel Core model
The Microsoft Excel Core model has been adjusted. Some spreadsheets have been
added to provide inputs, calculation and outputs. The original spreadsheets have not
been modified however some values calculated are used as inputs for the competition
costs calculation. This means the model can show both results of the “TDC
configuration” and “REO configuration”.
3.1 Modelling approach
Following the operators’ comments regarding the modified model issued at the end of
the 1st consultation, it has been established that the REO should not follow the exact
same architecture as for the incumbent, and that the architecture chosen by the REO
should be simplified. Therefore the modelling of the REO is now performed in a
separate spreadsheet, but using inputs from the LRAIC models.
This section first describes the modelled architecture for the REO, and then the data of
the LRAIC model used as inputs for the modelled REO.
3.1.1
Modelled architecture
The REO is considered to have a 3-layer core network architecture (excluding
DSLAMs):



The aggregation layer, composed of aggregation switches, which aggregates
DSLAMs and leased lines. This aggregation switches remain needed for a REO
because at a given TDC sites, the REO will aggregate different types of
services: from LLU, from bitstream, from VULA, from leased lines. These
aggregation switches are aggregated by edge equipment;
the edge layer, composed of edge routers. These routers are located at
interconnection sites with TDC. At these sites, the edge equipment aggregates
traffic from aggregation switches, the local DSLAMs, VULA connections and
remote DSLAMs not aggregated by aggregation switches (on LLU sites where
no aggregation switch has been installed), leased lines and the BSA
interconnection with TDC; and
the core layer. 4 core sites collocated with edge equipment (identical to TDC
core sites in terms of security) aggregate all edge routers and interconnected to
each other.
The architecture is illustred in the figure below.
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Figure 6 – Architecture modelled for the REO
DSLAM aggregated by
Aggregation switches ou
edge routers
Aggregation layer
Switches being aggregated
by the edge layer
Edge layer
Edge routers aggregating DSLAM
and switches, aggregated by 2 core
nodes
Core
4 core sites in a meshed
architecture aggregating
edge routers
Source: DBA
The switching equipment used to model the REO is the same equipment that is used in
the LRAIC model, for the corresponding layer. If not, this would mean that the REO is
using lower performances and therefore cannot perfectly replicate services provided by
TDC at the retail level.
3.1.2
Inputs from the LRAIC model
The modelling of the REO is based on some data from the LRAIC model. These inputs
are of different categories:





TDC topology:
o The description of the network is used to model the REO (i.e.
characterisation of cabinets, COs, sites that can be unbundled, TDC
BSA interconnection sites).
TDC copper lines and leased lines distribution:
o The REO is considered to have an homogenous market share over the
territory, that is to say the customer distribution follows TDC’s copper
lines distribution.
Hierarchical structure:
o The architecture of the REO is different from TDC architecture, however
the logical aggregation scheme adapted to the new structure follows
TDC aggregation logical routes.
Submarine cables
o TDC routes embed some submarine additional links. These links have
been reviewed and some have been selected to be used for the REO.
These links have been extracted in the Input spreadsheet.
Traffic:
o The traffic of the REO is based on the calculation of the incumbent’s
traffic and is adjusted based on the number of customers in the network.
The key adjustment factors have been extracted in the input
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model



spreadsheet, and the traffic has been directly extracted in the
dimensioning” spreadsheet.
Sites unit costs:
o Site unit costs for the Edge layer and the Core layer are based on TDC
sites unit costs, these costs have been extracted in the Input”
spreadsheet.
Non-network markups:
o Non-network markups used for the LRAIC model have been extracted in
the input spreadsheet and applied in the Financial” spreadsheet.
Assets characteristics and unit costs:
o Active assets deployed by the REO are based on the LRAIC assets list
(MSANs, Aggregation switches, Edge routers and Core routers).
3.2 Spreadsheets added
Seven spreadsheets have been added to the Core LRAIC model:





Three “Import from Access” spreadsheets are used to collect data from the
Access model regarding each of the three scenarios (A, B and C).
Competition Input spreadsheet gatheres the scenario parameters, assumptions
and inputs used for the calculation.
Competition Dimensioning spreadsheet, which is based on TDC’s customers
distribution, calculates the relevant number of network equipments to be
deployed for the REO.
Competition Financial spreadsheet calculates the costs based on the calculated
inventory and allocates to the different services.
Competition Output spreadsheet provides the total port-related costs and the
total traffic-related costs.
Figure 7 – New spreadsheets added
Source: DBA
3.2.1
Three access scenario inputs
Three input spreadsheet have been added to the Core LRAIC model: “Import from
Access - CompetitiA”, “Import from Access - CompetitiB” and “Import from Access CompetitiC”. They correspond to the output from the access LRAIC model in the
relevant scenario (A, B and C).
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
3.2.2
Competition inputs
This spreadsheet includes all specific inputs required for the competition model, in
particular:

The choice of scenario (described below);

operator’s specific adjustment parameters;




the BSA and LLU sites coverage of the operator for each scenario;
topology inputs for the REO;
the national market inputs;
the market details for each scenario (Market shares, volume based on the
market share and the total number of copper broadband in the country and
service penetration);


Traffic adjustment Inputs gathered in the model used to model the REO ;
the unit costs of bought and rented equipment. These costs are based on
TDC’s reference offer, some market prices, answers from operators and
international benchmarks.;
the cost of sites;
the non-network markups used; and
the core fibre network costs.



This spreadsheet enables to choose the relevant scenarios:


A, B or C (as decribed above);
Whether the transmission network cost (physical layer) should assume the
building of own fibres and trenches or the renting of dark fibres;

Whether sites (for LLU and BSA) are rented or owned;

The access technologies used with 5 scenarios depending if LLU service and
BSA service are used:
Table 3 – Access technologies scenario
Scenario
LLU customers
BSA customers
X
Y
X+Y
0
LLU customers only
X
0
BSA customers only
0
Y
All customers on BSA
0
X+Y
LLU + BSA (base case
scenario)
All customers on LLU
Source: DBA

NB: the base scenario for A, B and C is sites rented for DSLAMs
and Aggregation sites, and sites owned for edge and core sites,
which is the case if “LLU + BSA” is considered and transmission
network based on an own deployed fibre network.
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Distribution frames and cabling between the Main Distribution Frame (MDF) and the
Handover Distribution Frame (HDF) are dimensioned based on the number of
customers plus an additional 15%. This ratio is composed of three factors:



10% additional capacity has been assessed by considering the fact that some
customers are requiring a second copper pair to the MDF when they have also
subscribed to TDC’s PSTN service;
5% of spare capacity has been consider to handle the churn and faults;
An additional markup set to 0% has been included to take into account
customers subscribing to pair bonding services.
Figure 8 – Competition scenario inputs
Scenario
Transmission network
Site level
A
1
Owned
1
Rented/Owned
DSLAM floor
Aggregation floor
Edge floor
Core floor
Rented
Rented
Owned
Owned
Access service used
LLU
BSA
3.2.3
2
2
1
1
Edge site
Core site
LLU + BSA
VRAI
VRAI
Total
Broadband customers
Broadband customers
Broadband customers
Broadband customers
If owned, type
of site
1
BSA
LLU
LLU Split
LLU at CO
VULA
distribution on full coverage
100%
24%
76%
68%
on full coverage
175 685
42 870
132 815
68 099
used
175 685
42 870
132 815
119 149
used after rounding and applying min
175#690
of customers 43
to 658
deploy VULA
132backhaul
032
119 149
8%
7 807
12 883
12 883
Competition outputs
The competition outputs spreadsheet provides the main results calculated by the
competition model. The output is split into three parts:



The port-related costs (DSLAMs, sites dedicated to these DSLAMs, Handover
Distribution Frame and DSLAMs backhaul);
the traffic-related costs (switches, routers, transmission and sites costs
allocated to voice, broadband, tv and leased lines services); and
the customers taken into account for the calculation.
DSLAMs of alternative operators are considered to always be located in the colocation
room, and therefore the space, power and cooling are considered as always rented for
the DSLAM.
No consistent data has been provided for non-accompanied access costs. As the costs
appears to be non significant compared to other investments, these costs have been
disregarded (they represent generally less than 1% of costs of co-location and
backhaul costs, i.e. much less in percentage of total costs).
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
4 Results and analysis
This section summarizes the key results for scenario A, B and C. As explained earlier,
the base case scenario for these 3 scenarios is that sites dedicated to DSLAMs and
aggregation are rented (i.e. sites for LLU) and edge and core sites are owned.
Two scenarios are proposed:
1. The transmission network is supposed to be deployen by the REO
2. The transmission network is supposed to be rented by using dark fibres2
The main outputs of the model are the voice total costs, the broadband total costs
related to ports (and calculated on a per port basis) and the broadband total costs
related to traffic (and calculated on a per Mbps basis).
These outputs are summarized in the following table, first on a total annual cost basis
(excluding BSA rental costs), and second on a relative unit cost basis.
4.1 Results for an owned transmission network
Table 4 – Output for the competition margin model – Total costs
Scenario
A
B
C
4,014,770 DKK
4,002,847 DKK
3,984,061 DKK
Broadband
per port
12,776,972 DKK
6,565,132 DKK
3,307,686 DKK
Broadband
per Mbps
62,292,999 DKK
56,843,507 DKK
48,494,110 DKK
Voice
Source: Modified core Excel LRAIC model
Table 5 – Output for the competition margin model – Unit costs
Scenario
A
B
Broadband per Mbps
TDC
0.03
0.03
0.05
0.02
96.77
58.60
55.91
89.98
470.21
486.43
600.65
724.12
Voice (per min)
Broadband per port
C
Source: Modified core Excel LRAIC model
It is then possible to compare the results of the different scenarios unit costs with the
costs outputted by the original model corresponding to a national coverage.
2
The number of dark fibre links is calculated based on the number of active equipment to be linked to
remote sites.
Ref: 2012-55-DB-DBA-Fixed LRAIC
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Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Table 6 – Output for the competition margin model – Ratio of costs as compared to TDC
unit costs (TDC=1)
Scenario
A
B
C
TDC
Voice
1.49
1.48
2.21
1
Broadband
per port
1.08
0.65
0.62
1
Broadband
per Mbps
0.65
0.67
0.83
1
Source: Modified core Excel LRAIC model
4.2 Results for a rented transmission network
Table 7 – Output for the competition margin model – Total costs
Scenario
A
B
C
3,973,060 DKK
3,964,115 DKK
3,950,446 DKK
Broadband
per port
11,650,262 DKK
6,501,993 DKK
3,307,686 DKK
Broadband
per Mbps
42,129,329 DKK
37,928,238 DKK
31,438,286 DKK
Voice
Source: Modified core Excel LRAIC model
Table 8 – Output for the competition margin model – Unit costs
Scenario
A
B
Broadband per Mbps
TDC
0.03
0.03
0.05
0,02
88.24
58.04
55.91
89,98
318.01
324.57
389.39
724,12
Voice (per min)
Broadband per port
C
Source: Modified core Excel LRAIC model
It is then possible to compare the results of the different scenarios unit costs with the
costs outputted by the original model corresponding to a national coverage.
Ref: 2012-55-DB-DBA-Fixed LRAIC
18
Revision of DBA’s competition margin model
Changes performed in the LRAIC models to output the relevant data for the competition margin
model
Table 9 – Output for the competition margin model – Ratio of costs as compared to TDC
unit costs (TDC=1)
Scenario
A
B
C
TDC
Voice
1.47
1.47
2.19
1
Broadband
per port
0.98
0.64
0.62
1
Broadband
per Mbps
0.44
0.45
0.54
1
Source: Modified core Excel LRAIC model
4.3 Notes
It has to be noted that voice costs are mainly fixed costs (IMS, Gateways, etc). TDC
having a market share much more important than an alternative operator (TDC
observes 7x more minutes than the alternative operator in scenario A), the average unit
cost is therefore higher for this alternative operator.
Regarding the cost per port, the smaller the site is, the less filled is the DSLAM, and
therefore the most expensive is the port cost. In scenario C, only big sites are covered,
therefore DSLAMs are almost all full, whereas in scenario A, a lot of small sites are
covered, leading to not optimized DSLAMs.
More generally speaking, two opposite effects are playing between scenarios:


Economies of scale: TDC has more economies of scale than A and B. A and B
have more economies of scale than C (15% market share against 10%);
Capillarity of the network: TDC covers much more sites which is much more
expensive than the network of A, which itself is more expensive than the
network of B, which itself is more expensive than the network of C.
Ref: 2012-55-DB-DBA-Fixed LRAIC
19